Mountain-God said:
Do you have any ideas you'd like to share?
Why yes! I'm glad you asked
(and welcome to CFC)
My answers: Overall, I think the affects will be minimal - slightly better for retaining trained people, slightly more in training, a little more money to the low and middle classes.
As I see it, people will now take out loans to the full extent that they can - if only to put it in the bank and earn interest. Parents won't bother saving for their children's education - why save when the student is going to be given free money? Again, borrowing increases.
Along with the increased number of students taking out loans, the voluntary replayments will drop to zero - which I believe will, in terms of total student debt, wipe out any effects of no interest. Summary - net student debt will grow. The government still has to find working capital to finance these loans - that means the taxpayer still has to come-up with it in the short-term - even if they get it back, it will mean more moeny required for students.
Now - I don't think student debt is bad
per-se. The average student debt is 14,000 - someone on minimum-wage gets $9.50 an hour - around $300/week net. Now - if they choose to live on (say) $250/week (double the 'living allowance' for Uni), then they can pay there student loans back in about 6 years. If they earn more than minimum wage, or live on slightly less - then they can pay it back faster. BTW - I paid mine back (14,500) in 3 years on $23,500. I believe that people don't pay back student loans not because they can't, but because they choose not to. Lets face it - you leave uni and start earning - are you more interested in spending money on consumer durables and generally improving your lifestyle; or paying off a cheap (and lets face it - even now, 7% is cheap) loan?
The second a very slight aid to families, few more children and earlier, but more importantly, better able to pay for children's education.
Still, the affects would seem to be minimal over time.
The ability to have more money for children's education is good - but education is being covered by the student loans. I actually believe that this will incentivise the people who can't really afford to have more children to have them anyway - the low income earners. People who look short-term and just see the extra money coming in; not looking at the amount it actually costs to raise kids. I think they will actually find themselves worse-off (in a strange sort of way). I think it is going to cost a fortune to administer - having to process all the applications from thousands of people - and why get people who are in the top tax-bracket to apply for welfare?
Those who are single and childless are going to be quite annoyed at this - targetted policies that specifically exclude them. Unfortunately for New Zealand, its these people who are the most mobile, and hence the people that we risk losing overseas.